The bank stress test results are out (pdf) and the bottom line is the 19 largest banks need about $75 billion in more capital. The real problem is the adverse scenarios used: even worst case, these tests assumed -3.3% GDP, which has already been shattered, 8.9% unemployment (which we should reach tomorrow) and only a 22% drop in housing prices, again well under the 30% drop we're looking at in prices year over year.
The worst case scenario has already been blown wide open. The banks need another $75 billion just to survive the rosy scenario Treasury threw at them.
How much money will they really, really need? I'm betting far more than just $75 billion. These results are a joke across the board.
Don't count on a quick recovery. Count on just enough of a ramp to get a good head of steam before we plummet into the ravine.
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